Wage theft is the “illegal withholding of wages or denial of benefits that are rightfully owed to employees.” A common misunderstanding is that wage theft only affects low-income workers through obvious practices such as being cheated out of overtime or paying an employee subminimum wages. Today, white collar occupations such as engineers and developers are facing intricate wage theft schemes that are obfuscated by backroom deals and threats of criminal prosecution on a national scale. The problem with white collar wage theft is that the employers are highly educated and supported by armies of lawyers that help them shirk the letter of the law, while perverting its spirit.

end wage theft (Photo credit: torbakhopper)

Low-income wage theft is obvious because employers steal directly from employees. White collar wage theft is achieved indirectly by influencing the labor market. An “anti-poaching” arrangement will artificially depress the salaries of every white collar laborer in the region or industry. Illicit threats of criminal prosecution makes looking for a new job terrifying and expensive. Imagine paying a lawyer every time you change jobs -- labor disputes in federal court alone grew over 400% in the last two decades. Typically for starting a legal defense an attorney will require a $5,000 to $10,000 retainer. The total cost may easily exceed $30,000 to $50,000. Thus, unscrupulous employers will force employees to accept lower salaries because of fear.

What’s At Stake?

Low-income workers experience wage theft through unpaid hours, unpaid overtime and subminimum wages on a weekly basis and lose 15% of their annual income, or $2,634 per year. Former-white collar employees suing Google, Apple and Intel likely lost at least $11,918 per year, or 450% more than their low-income counterparts. Wage theft affects everyone, and it doesn’t discriminate.

We’re unable to seek better employment. Employers already hold an inherent advantage over employees based on the relationship’s hierarchy. If we allow these employer to continue these illegal practices, it will make salary negotiations impossible.

Finally, this isn’t a trend that’s “starting.” We’re only learning about the trend’s existence – today. We have had little data on white collar wage theft before these cases came to light. After the facts were discovered, it is still difficult to calculate the losses. White collar jobs often have performance bonuses, different pay scales for the same position and other variables that make it unmanageable to project our losses without specific payroll records. We can only imagine the orders of magnitude that we’re losing.

Conspiring To Pay Us Less

Google, Apple, Intel and Adobe are settling a class-action lawsuit filed by 64,613 engineers for $3 billion in lost wages from 2005 to 2009. (Take note that it took about 10 years to bring the case to the point where Google and company are willing to even discuss a settlement.) The $3 billion number may sound exaggerated, but it is more than reasonable with a conservative estimate.

The case is focused on the issue that these engineers were prevented from leaving for another company, and wages were artificially depressed. The Bureau of Labor’s statistics illustrates that a software engineer in California earns $119,180 on average. The minimum raise expected in jumping companies is 10%. Thus, it is reasonable to assume that these employees were cheated out of at least a 10% raise ($11,918) over five years. That is $770 million in lost wages per year (64,613 engineers multiplied by $11,918 in lost wages). This means that employees lost $3.85 billion over five years ($770 million multiplied by five years). This is more than the $3 billion alleged in the lawsuit, ignoring all considerations of interest or penalties.

The problem is that Google, Apple, Intel and Adobe are attempting to settle the case for $324 million. These companies are looking to buyout the engineers with an offer that is less than 11% of the original claim. This also fails to take into consideration the legal fees of $75 million. This means that each engineer has waited 10 years to receive an offer from Google or Apple worth less than $1,000 per year covered in the lawsuit.

Michael Devine, a plaintiff in the case, is against accepting the settlement. Devine analogizes the settlement to a boy named “Google” getting caught on video shoplifting a $400 iPad from the Apple Store. Is it a fair and just punishment for Google to keep the iPad, pay only $40, or 10% of the stolen property’s value, and walk away without admitting any wrongdoing?

It would be unfortunate for this case to end here at a settlement for so little. It sends the wrong message to every corporation around the globe. It tells corporations, “You can break the law with little to zero risk. Even if you’re caught, it’s only going to cost you peanuts.” If the case goes forward and the plaintiffs win, they would receive treble damages of $9 billion, an amount that would send a message to every would-be CEO wage thief. (Note, I don’t fault anyone for taking the settlement because fighting it out will likely take years in court, and there is always a risk of losing.)

Using Jail To Keep You From A Better Job

Jail is now a threat that skilled employees face, when looking for better jobs. A new scheme that is being perpetrated against white collar laborers is the threat of “criminal conviction” upon leaving the company. Kang Gao is an engineer who was unaware that his former employer was recording his exit interview to prosecute him. This practice, in effect, creates a passive, yet effective threat to all employees that leaving their employer could result in criminal prosecution. Thus, employees are unable to fairly seek opportunities that properly compensate their abilities. This is a systematic attempt to prevent employees from seeking better-paying job opportunities. Thus, these employers are creating barriers to the labor market and preventing employees from taking jobs that will compensate them at a market rate.